Tata Group's consumer unit stepped up its efforts to buy at least 51 per cent of popular snack food maker Haldiram's, said sources. But there is a roadblock in the deal as the company is not comfortable with the USD 10 billion valuation sought.
If all goes well, the conglomerate will directly compete with Pepsi and billionaire Mukesh Ambani's Reliance Retail.
Sources said Haldiram's, a household name, is also talking with private equity firms including Bain Capital about the sale of a 10 per cent stake.
Tata Consumer Products's presence in retail
Tata Consumer Products already owns UK tea company Tetley and has a partnership with Starbucks in India. It has baulked at the USD 10 billion valuation given that Haldiram's annual revenue is around USD 1.5 billion, the sources said.
Tata Consumer shares rose more than 3 per cent in late Wednesday trade in Mumbai after the news about the deal surfaced.
Tata wants to buy more than 51 per cent but has told Haldiram's that its "ask is very high.", a person with direct knowledge of the discussions told news agency Reuter.
The potential acquisition represents an exciting opportunity for Tata, the person said, adding, "Tata (Consumer) is seen as a tea company. Haldiram's is huge in the consumer space and has a wide market share."
The sources spoke on condition of anonymity.
A spokesperson for Tata Consumer Products said it "does not comment on market speculation". Haldiram's Chief Executive Krishan Kumar Chutani and Bain declined to comment.
Haldiram's holds 13 per cent share of snack market
Family-run Haldiram's traces its origins back to a tiny shop founded in 1937 and is well-known for its crispy "bhujia" snack sold for as little as 10 rupees across mom-and-pop stores. It has almost 13 per cent share of India's USD 6.2 billion savoury snack market, according to Euromonitor International. Pepsi, famous for its Lay's chips, also has around 13 per cent. Haldiram's snacks are also sold in overseas markets like Singapore and the United States. The company has around 150 restaurants selling local food, sweets and western cuisine.
Purchasing Haldiram's would significantly expand Tata's consumer products reach.
"If you want to suddenly grow big in size, no one better to provide access than Haldiram's. No other brand attacks packaged food, and food services, with equal panache," said Ankur Bisen, head of consumer and retail at Indian consultancy Technopak.
Tata's consumer unit, which also sells salt, pulses and mineral water, had revenue of USD 1.7 billion in the past financial year. It is a relatively small part of the Tata Group, whose businesses span autos, aviation and hotels and which had combined revenue last year of some USD 144 billion.
Haldiram's Chairman Manohar Lal Agrawal last year told CNBC TV18 in an interview the company wanted to attract private equity investors and debut on the stock market in 2-3 years.
Haldiram's - which has multiple registered companies in the country - had revenue of at least USD 981 million in the financial year ended March 2022, according to regulatory filings. The first two sources, however, said its revenue is now close to USD 1.5 billion and annual operating profit is around USD 200 million.
(With Reuters inputs)